Determinants of Enterprise Training: What are the Training Constraints?
 | |
|  |
Subscribe to OECD's articles
 | |
|
|  |
 | |
|
| |
 | |||||||
|
Determinants of Enterprise Training: What are the Training Constraints?
across firms. A natural question then is why do certain firms invest more in training and
others do not. There is a certain amount of cross-country and individual country evidence
in the literature to identify why this is the case.
The only cross-country/cross-region survey in developing countries that sheds
light on the training determinant is the WBES. This survey contains questions where
firms are asked to rank on a scale of one (not important) to five (very important) the
relevance of seven statements to their decision to provide little or no training (Batra,
2003):
1) training is not affordable because of limited resources;
2) training is costly because of high labour turnover;
3) firm lacks knowledge about training techniques and organisation;
4) firm used a mature technology, so learning-by-doing is sufficient;
5) informal training is adequate;
6) skilled workers are readily hired from other firms;
7) firm sceptical about the benefits of training.
Among the most important reasons for providing little or no training, East Asian
firms responded: 4) mature technology (45 per cent); 5) adequacy of informal training (35
per cent); and 2) labour turnover (33 per cent), to be the three most important
determinants. Firms in LAC region responded: 6) availability of hiring skilled workers from
other firms (44 per cent); 4) mature technology (35 per cent); 5) adequacy of informal
training (33 per cent), being the three key reasons. For firms already using mature
technologies, there is limited scope for improving on existing techniques and workers can
become more proficient by learning by doing or through informal training (Batra, 2003).
The WBES also indicates that 27 per cent of firms in East Asia and 13 per cent of
firms in the LAC region face training constraints due to 1) non-affordability coming from
limited resources. This is likely to be the case due to the credit constraints faced by many
enterprises in developing countries. While there are increasing numbers of training
grants and subsidy schemes available in developing countries, not all the firms are
eligible for training subsidies and credit availability may thus be important. Small- and
medium-sized enterprises (SMEs) are more likely to face this type of training constraint
since they are the ones who are less likely to have access to the credit market. Indeed,
the WBES show that, in East Asia, 29 per cent of small-sized firms, and 19 per cent of
medium-sized firms cannot afford training due to limited resources, whereas only 13 per
cent of large-sized firms cannot afford it (Batra, 2003).
Lack of knowledge also appeared to be an important reason for providing little or
no training. This was especially true in East Asia (24 per cent). Larger firms are more
likely to have better access to information on training techniques and organisation.
Indeed, in East Asia, only 18 per cent of large firms claimed to have constraints while
more than 28 per cent of small firms lacked access to such information (Batra, 2003).
Firms having a perception of high-labour turnovers is another important reason
why firms provided less or no training. Thirty-three per cent of firms in East Asia and 18
per cent of firms in the LAC region indicated their doubt that training investment is not
worthwhile due to worker turnovers. This is more likely to be the case among small firms
facing difficulties, whether financial or contractual, in providing incentives to keep trained
workers. This is verified by the high percentage of small firms (32 per cent) showing
concerns, while a smaller fraction of large firms (22 per cent) indicate this to be a
problem.
To sum up, the WBES indicates that firms in East Asia and LAC face training
constraints due to a number of market failures including information constraints, credit
constraints and labour turnovers. These constraints were found to be less binding for
larger firms. Larger firms have much wider opportunities to receive information regarding
training techniques and organisation methods. Their training burden per worker is likely
to be lower than smaller firms, since the opportunity cost of losing one employee in
training activities and per worker cost of training is presumably lower.
Studies that focus on individual countries using firm surveys are consistent with
these findings. For example, Zeufack (1999), Tan and Batra (1996), Tan and Lopez-
Acevedo (2003), and Miyamoto and Todo (2003) show that the effect of firm size on
training incidence is significant and large for Mexico, Indonesia, Thailand and Malaysia.
Miyamoto and Todo (2003) use variables capturing legal status26 in order to capture the
extent of credit constraint among Indonesian firms. They find that having no legal status
reduced the probability of training. Note that the findings that large firm size positively
affects training is consistent with firms not training due to information and credit
constraints and labour turnovers. This is because larger firms are less likely to be credit
constrained, more likely to have access to information on training, and less likely to suffer
from high labour turnovers. Smaller firms on the other hand usually find it hard to gain
credits, participate in training workshops, face difficulties replacing workers engaging in
training activities, and will not be able to provide attractive incentives for workers not to
quit after training.
Another interesting finding from these studies is the positive role of a firms
technological sophistication on training determinants. Tan and Batra (1996), Zeufack
(1999), and Tan and Lopez-Acevedo (2003), all show that R&D investment is an
important determinant for training in Mexico, Malaysia, Thailand and Chinese Taipei. For
Mexico this impact becomes even stronger over time (Tan and Lopez-Acevedo, 2003).
This is consistent with firms using a sophisticated production process and R&D requiring
intensive training for workers to adapt to such a mode of operation.
OECD DEVELOPMENT CENTRE
Working Paper No. 211
HUMAN CAPITAL FORMATION
AND FOREIGN DIRECT INVESTMENT
IN DEVELOPING COUNTRIES
by
Koji Miyamoto
Determinants of Enterprise Training What are the Training Constraints - To learn more about this author, visit OECD Development Centre's Website.
Like this article? Share it with your friends
Enterprise Surveys have shown that large variances in training incidence exist
across firms. A natural question then is why do certain firms invest more in training and
others do not. There is a certain amount of cross-country and individual country evidence
in the literature to identify why this is the case.
The only cross-country/cross-region survey in developing countries that sheds
light on the training determinant is the WBES. This survey contains questions where
firms are asked to rank on a scale of one (not important) to five (very important) the
relevance of seven statements to their decision to provide little or no training (Batra,
2003):
1) training is not affordable because of limited resources;
2) training is costly because of high labour turnover;
3) firm lacks knowledge about training techniques and organisation;
4) firm used a mature technology, so learning-by-doing is sufficient;
5) informal training is adequate;
6) skilled workers are readily hired from other firms;
7) firm sceptical about the benefits of training.
Among the most important reasons for providing little or no training, East Asian
firms responded: 4) mature technology (45 per cent); 5) adequacy of informal training (35
per cent); and 2) labour turnover (33 per cent), to be the three most important
determinants. Firms in LAC region responded: 6) availability of hiring skilled workers from
other firms (44 per cent); 4) mature technology (35 per cent); 5) adequacy of informal
training (33 per cent), being the three key reasons. For firms already using mature
technologies, there is limited scope for improving on existing techniques and workers can
become more proficient by learning by doing or through informal training (Batra, 2003).
The WBES also indicates that 27 per cent of firms in East Asia and 13 per cent of
firms in the LAC region face training constraints due to 1) non-affordability coming from
limited resources. This is likely to be the case due to the credit constraints faced by many
enterprises in developing countries. While there are increasing numbers of training
grants and subsidy schemes available in developing countries, not all the firms are
eligible for training subsidies and credit availability may thus be important. Small- and
medium-sized enterprises (SMEs) are more likely to face this type of training constraint
since they are the ones who are less likely to have access to the credit market. Indeed,
the WBES show that, in East Asia, 29 per cent of small-sized firms, and 19 per cent of
medium-sized firms cannot afford training due to limited resources, whereas only 13 per
cent of large-sized firms cannot afford it (Batra, 2003).
Lack of knowledge also appeared to be an important reason for providing little or
no training. This was especially true in East Asia (24 per cent). Larger firms are more
likely to have better access to information on training techniques and organisation.
Indeed, in East Asia, only 18 per cent of large firms claimed to have constraints while
more than 28 per cent of small firms lacked access to such information (Batra, 2003).
Firms having a perception of high-labour turnovers is another important reason
why firms provided less or no training. Thirty-three per cent of firms in East Asia and 18
per cent of firms in the LAC region indicated their doubt that training investment is not
worthwhile due to worker turnovers. This is more likely to be the case among small firms
facing difficulties, whether financial or contractual, in providing incentives to keep trained
workers. This is verified by the high percentage of small firms (32 per cent) showing
concerns, while a smaller fraction of large firms (22 per cent) indicate this to be a
problem.
To sum up, the WBES indicates that firms in East Asia and LAC face training
constraints due to a number of market failures including information constraints, credit
constraints and labour turnovers. These constraints were found to be less binding for
larger firms. Larger firms have much wider opportunities to receive information regarding
training techniques and organisation methods. Their training burden per worker is likely
to be lower than smaller firms, since the opportunity cost of losing one employee in
training activities and per worker cost of training is presumably lower.
Studies that focus on individual countries using firm surveys are consistent with
these findings. For example, Zeufack (1999), Tan and Batra (1996), Tan and Lopez-
Acevedo (2003), and Miyamoto and Todo (2003) show that the effect of firm size on
training incidence is significant and large for Mexico, Indonesia, Thailand and Malaysia.
Miyamoto and Todo (2003) use variables capturing legal status26 in order to capture the
extent of credit constraint among Indonesian firms. They find that having no legal status
reduced the probability of training. Note that the findings that large firm size positively
affects training is consistent with firms not training due to information and credit
constraints and labour turnovers. This is because larger firms are less likely to be credit
constrained, more likely to have access to information on training, and less likely to suffer
from high labour turnovers. Smaller firms on the other hand usually find it hard to gain
credits, participate in training workshops, face difficulties replacing workers engaging in
training activities, and will not be able to provide attractive incentives for workers not to
quit after training.
Another interesting finding from these studies is the positive role of a firms
technological sophistication on training determinants. Tan and Batra (1996), Zeufack
(1999), and Tan and Lopez-Acevedo (2003), all show that R&D investment is an
important determinant for training in Mexico, Malaysia, Thailand and Chinese Taipei. For
Mexico this impact becomes even stronger over time (Tan and Lopez-Acevedo, 2003).
This is consistent with firms using a sophisticated production process and R&D requiring
intensive training for workers to adapt to such a mode of operation.
OECD DEVELOPMENT CENTRE
Working Paper No. 211
HUMAN CAPITAL FORMATION
AND FOREIGN DIRECT INVESTMENT
IN DEVELOPING COUNTRIES
by
Koji Miyamoto
Determinants of Enterprise Training What are the Training Constraints - To learn more about this author, visit OECD Development Centre's Website.
Like this article? Share it with your friends
 | |
 |
No article feedback found. |
| |
Leave Your Feedback |
 | |
| |||
John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firms clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
|||
Linda RichardsonLinda Richardson is the Founder and Executive Chairwoman of Richardson, a global sales training and performance improvement company. As a recognized leader in the industry, she has won the coveted Stevie Award for Lifetime Achievement in Sales Excellence and she was identified by Training Industry, Inc. as one of the Top 20 Most Influential Training Professionals. Ms. Richardson is credited with the movement to Consultative Selling and is the author of ten books on selling and sales management, including Sales Coaching Making the Great Leap from Sales Manager to Sales Coach, and Stop Telling, Start Selling. She teaches sales and management at the Wharton Graduate School of the University of Pennsylvania and the Wharton Executive Development Center. Linda is a frequent speaker at industry and client conferences, has been published extensively in industry and training journals, and has been featured in numerous publications, including The Wall Street Journal, Forbes, Nations Business, Selling Power, Success, and The Conference Board Magazine. Learn more about Richardson's sales training and performance improvement solutions at http://www.richardson.com web - Visit Linda Richardson's Website |
|||
David AchesonDavid Acheson is the founder of DCJA Consultancy. DCJA Consultancy is a management consultancy business specialising in B2B sales consultancy. They offer bespoke and packaged sales consultancy including Sales Optimisation Review, Interim Sales Management, Sales & Marketing Review, 1:1 Sales & Management Staff Analysis, Management Training, Solution Sales Training, Creation of New Pay Plan, KPI's, run Customer Feedback Campaigns, assist with Recruitment, Coaching, Appraisals and set up Strategic Marketing Campaigns. David spent his early career in accountancy and then moved into sales in 1982, working in Office Equipment, IT, Advertising, Training, Outsourcing and Consultancy. He has held many Senior Positions in SMBs and Global Organisations including Head of Sales Operations & Head of Business Development. His knowledge, skills and great experience of the Sales Industry has led to David making keynote speeches and running educational sessions to key businesses through organisations including The Chamber of Commerce and Business Link. - Visit David Acheson's Website |
|||
John AlexanderJohn has taught keyword research and SEO skills to small groups of business owners and Webmasters from over 80 different countries world wide since 2002. John is also the Director of Search Engine Academy ; Co-director of Training at Search Engine Workshops offering live, SEO Workshops with his partner SEO educator Robin Nobles, author of the very first comprehensive online search engine marketing courses at SEO Training Online and the SEO Workshop Resource Center. I look forward to hearing from you! - Visit John Alexander's Website |
|||
Staging DivaDebra Gould, aka The Staging Diva, is President of Six Elements Inc., an internationally recognized home staging company. Inspired by many requests from aspiring home stagers wanting to start similar businesses, Gould created the Staging Diva Home Staging Business Training Program. Gould has trained over 1000 Staging Diva Graduates worldwide to start staging businesses. Buying decorating and selling six of her own homes in four years lead to an interest in real estate staging which she turned into a career with the launch of sixelements.com in 2002. Since then she has staged hundreds of homes in addition to teaching home staging training. Gould is the author of several home staging resources including a series of popular ebooks made up of a Design Guide, Color Guide and Portfolio Guide. For more information about Debra Gould visit stagingdiva.com. - Visit Staging Diva's Website |
|||
Leanne Hoagland-SmithAre your sales where you want them to be? Will you be one of the few who achieves sales or business success or one of the many who have failed to change? Are you tired of being told you are like everyone else? Then you may find my first book on sales of interest. Be the Red Jacket in the Sea of Gray Suits, The Keys to Unlocking Sales available at Amazon or at http://www.processspecialist.com/red-jacket.htm. This book is a reflection of my no-nonsense approach to improving sales to overall business results. If you are truly committed to making sustainable changes, then I can help you secure a positive return on your investment because I focus on executable solutions not telling you the problems you already know you have. From training to corporate (group) coaching to executive one on one coaching, my approach is to assess, create awareness, build a goal driven action plan and then execute. The bottom line question is "Not do you or your employees know it, but do you or they want to do it?" Please call for a free strategy session at 219.759.5601. - Visit Leanne Hoagland-Smith's Website |
|||
|
To learn more about the Evan Elite Author Program please contact us. | |||
 | ||
 |
||
 |
||
 |
||
|
| ||
 |
| Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details. |
|
|
 |
| Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media |
|
|
 |
"Learn straight from Evan how you can Make a Full Time Income (And More) from a Website"
Click Here To Learn More |
|
|
|
|
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
|
|
|
 Biography How To Win New Business Increase productivity Accessing Capital Improve Web Site Conversions |
|
 | ||
 |
Top 50 Political Blogs
Top Political Blogs of 2009 | |
 |
The Top 10 ProBlogger Posts
Best Posts for Bloggers | |
| ||
 | ||||
| ||||
|
| ||||
| ||||
|
|
|
|
|
||||||||||||
|
Email us your ideas on how to make our website more valuable! Thank you Sharon from Toronto Salsa Lessons / Classes for your suggestions to make the newsletter look like the website and profile younger entrepreneurs like Jennifer Lopez and Sean Combs!
|
|
|
| ||||||||||||
| ||||||||||||
|
|
||||||||||||